What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-09 · 199 added, 168 removed, 677 unchanged (35% of the section changed)

4 unchanged sentences

(Amounts in thousands, except share amounts)

September 30,

Current assets

35 unchanged sentences

10,000,000 shares authorized;

zero shares outstanding as of June 30, 2022 and December 31, 2021

zero shares outstanding as of September 30, 2022 and December 31, 2021

Common stock;

1 unchanged sentence

150,000,000 shares authorized;

47,092,968 and 46,990,031 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

47,213,561 and 46,990,031 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

Treasury stock at cost;

34,959,285 and 35,062,222 shares as of June 30, 2022 and December 31, 2021, respectively

34,838,692 and 35,062,222 shares as of September 30, 2022 and December 31, 2021, respectively

Accumulated other comprehensive income (loss)

8 unchanged sentences

(Amounts in thousands, except per share amounts)

Three months ended June 30,

Six months ended June 30,

Three months ended

September 30,

Nine months ended

September 30,

Operating expenses

32 unchanged sentences

(Amounts in thousands)

Three months ended June 30, 2021 and 2022

Three months ended September 30, 2021 and 2022

Stockholders’ Equity of the Company

3 unchanged sentences

Income (Loss)

Balance as of March 31, 2021

Balance as of June 30, 2021

Dividends to shareholders ($ 0.47 per common share)

5 unchanged sentences

Other, net of tax

Balance as of June 30, 2021

Balance as of September 30, 2021

Stockholders’ Equity of the Company

3 unchanged sentences

Income (Loss)

Balance as of March 31, 2022

Balance as of June 30, 2022

Dividends to shareholders ($ 0.52 per common share)

5 unchanged sentences

Other, net of tax

Balance as of June 30, 2022

Six months ended June 30, 2021 and 2022

Balance as of September 30, 2022

Nine months ended September 30, 2021 and 2022

Stockholders’ Equity of the Company

11 unchanged sentences

Other, net of tax

Balance as of June 30, 2021

Balance as of September 30, 2021

Stockholders’ Equity of the Company

11 unchanged sentences

Other, net of tax

Balance as of June 30, 2022

Balance as of September 30, 2022

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

(Amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

5 unchanged sentences

Provision for credit losses

(Gain) loss on disposal of assets

Loss on disposal of assets

Impairment losses

2 unchanged sentences

Equity-based compensation expense

(Gain) loss on foreign currency derivatives

Loss on foreign currency derivatives

Changes in assets and liabilities, net of acquisitions:

17 unchanged sentences

Payments of debt issuance costs

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

8 unchanged sentences

Acquisition of equipment through increase in accounts payable, net

Dividend declared but not paid

The accompanying notes are an integral part of these consolidated financial statements.

12 unchanged sentences

TTEC Digital and TTEC Engage.

● TTEC Digita l is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting, and transformation enabled by proprietary CX applications and technology partnerships.

● TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting, and transformation enabled by proprietary CX applications and technology partnerships.

TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of customer relationship management (“CRM”), data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes.

27 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheets that sum to the amounts reported in the Condensed Consolidated Statement of Cash Flows (in thousands):

June 30, 2022

September 30, 2022

December 31, 2021

32 unchanged sentences

The potential payments range from a minimum of zero to an unlimited maximum.

Based on the model, a combined $ 8.8 million expected future payment was calculated and recorded as of the acquisition date, which is included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

The Faneuil Transaction included a call option providing the right but not the obligation to purchase additional assets in the utilities and commercial healthcare verticals based on trailing twelve-month revenue plus an additional earn-out payment based on newly added contracts.

A second call option provided the right to purchase a software intangible asset and related support functions based on trailing twelve-month revenue.

These call options were valued based on information including the call right and the exclusivity period and a $ 0.3 million asset was recorded as of the acquisition date which is included in Other long-term assets in the accompanying Consolidated Balance Sheets.

Based on the model, a combined $ 8.8 million expected future payment was calculated and recorded as of the acquisition date.

During the third quarter of 2022, a $ 2.4 million net gain was recorded related to fair value adjustments for the estimated contingent payments based on the timing of cash flows and market interest rates which resulted in an updated discount factor for one contract and a complete reduction for the second contract as it was not awarded to the Company.

The benefit was included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

As of September 30, 2022, the contingent payment is accrued at $ 6.4 million and is included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

A second call option provided the right to purchase a software intangible asset and related support functions based on trailing twelve-month revenue.

The fair value was unchanged as of September 30, 2022.

The Faneuil Transaction included an indemnity escrow which was disbursed as a holdback payment on the acquisition date.

The indemnity payments relate to real estate and technology funds that will be spent post-close related to various IT upgrades and real estate expenses, and indemnity related to potential future employee wage increases.

The indemnity payments were valued based on a weighted average of several current scenarios and a receivable of $ 10.4 million was recorded as of the acquisition date which is included in Other current assets in the accompanying Balance Sheets.

A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible asset.

The significant assumptions utilized in calculating the fair value of the customer relationships intangible asset were the customer attrition rate, revenue growth rates, forecasted EBITDA, contributory asset charge, and the discount rate.

The indemnity payments were valued based on a weighted average of several current scenarios and a receivable of $ 10.4 million was recorded as of the acquisition date.

During the third quarter of 2022, a reduction in the fair value was calculated and a $ 4.4 million expense was recorded related to a fair value adjustment for the receivable based on current information reflecting a better outcome with the contract negotiations.

The reduction in fair value related expense was included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

As of September 30, 2022, the fair value of the receivable is $ 0.5 million and is included in Other current assets in the accompanying Consolidated Balance Sheets.

A multi-period excess earnings method under the income approach was used to estimate the fair value of the customer relationships intangible assets.

The significant assumptions utilized in calculating the fair value of the customer relationships intangible assets were the customer attrition rate, revenue growth rates, forecasted EBITDA, contributory asset charge, and the discount rate.

The following summarizes the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):

12 unchanged sentences

Total purchase price

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The estimates of fair value of identifiable assets and liabilities assumed are preliminary, pending finalization of the valuation, lease evaluation, and tax returns, thus are subject to revisions that may result in adjustments to the values presented above.

3 unchanged sentences

The acquired goodwill and intangibles and operating results of Faneuil are reported within the TTEC Engage segment from the date of acquisition.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

On April 8, 2021 , the Company acquired, through its subsidiary TTEC Digital, LLC, 100 % of the outstanding stock of Avtex Solutions Holdings, LLC (“Avtex”).

6 unchanged sentences

During the fourth quarter of 2021, TTEC implemented ASU 2021-08 which required an accounting modification to the deferred revenue balance as of the acquisition date (see discussion above in Note 1).

The deferred revenue balance was evaluated as if TTEC had been the company securing the initial contract and accounted for these contracts in accordance with ASC 606.

The deferred revenue balance was evaluated as if TTEC had been the company securing the initial contracts and accounted for these contracts in accordance with ASC 606.

Based on this re-assessment, the $ 4.9 million reduction initially recorded to deferred revenue in connection with the purchase price accounting was eliminated and an offsetting increase to Goodwill was recorded as of the acquisition date.

29 unchanged sentences

Financial Impact of Acquired Businesses

The acquired businesses purchased in 2021 and 2022 noted above contributed revenues of $ 90.6 million and net income of $ 21.1 million, to the Company for the three months ended June 30, 2022 and revenues of $ 143.9 million and net income $ 38.9 million, to the Company for the six months ended June 30, 2022, respectively.

The unaudited proforma financial results for the three and six months ended June 30, 2022 combines the consolidated results of the Company, Avtex and Faneuil assuming the acquisition had been completed on January 1, 2021.

The reported revenue and net income of $ 604.3 million and $ 25.2 million would have been $ 604.3 million and $ 25.3 million for the three months ended June 30, 2022, respectively, on an unaudited proforma basis.

The reported revenue and net income of $ 1,193.0 million and $ 58.6 million would have been $ 1,235.0 million and $ 63.1 million for the six months ended June 30, 2022, respectively, on an unaudited proforma basis.

The acquired businesses purchased in 2021 and 2022 noted above contributed revenues of $ 96.0 million and net income of $ 6.0 million to the Company for the three months ended September 30, 2022 and revenues of $ 243.6 million and net income $ 16.2 million to the Company for the nine months ended September 30, 2022.

The unaudited proforma financial results for the three and nine months ended September 30, 2022 combines the consolidated results of the Company, Avtex and Faneuil assuming the acquisitions had been completed on January 1, 2021.

The reported revenue and net income of $ 592.5 million and $ 22.2 million would have been $ 592.5 million and $ 22.2 million for the three months ended September 30, 2022, respectively, on an unaudited proforma basis.

The reported revenue and net income of $ 1,785.4 million and $ 80.9 million would have been $ 1,827.4 million and $ 85.4 million for the nine months ended September 30, 2022, respectively, on an unaudited proforma basis.

TTEC HOLDINGS, INC.

7 unchanged sentences

The Company reports the following two segments:

TTEC Digita l is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting and transformation enabled by proprietary CX applications and technology partnerships.

TTEC Digital is one of the largest pure-play CX technology service providers with expertise in CX strategy, digital consulting and transformation enabled by proprietary CX applications and technology partnerships.

TTEC Digital designs, builds, and operates robust digital experiences for clients and their customers through the contextual integration and orchestration of CRM, data, analytics, CXaaS technology, and intelligent automation to ensure high-quality, scalable CX outcomes.

18 unchanged sentences

The following tables present certain financial data by segment (in thousands):

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Six Months Ended June 30, 2022

Six Month Ended June 30, 2021

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2022

Nine Month Ended September 30, 2021

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Capital Expenditures

June 30, 2022

September 30, 2022

December 31, 2021

3 unchanged sentences

The following table presents the Company revenue based upon the geographic location where the services are provided (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

United States

3 unchanged sentences

(4) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS

The Company had one client that contributed in excess of 10% of total revenue for the six months ended June 30, 2022;

The Company had one client that contributed in excess of 10% of total revenue for the nine months ended September 30, 2022;

this client operates in the automotive industry and is included in the TTEC Engage segment.

This client contributed 10.5 % and 9.0 % of total revenue for the six months ended June 30, 2022 and 2021, respectively.

The Company had one client that contributed in excess of 10% of total revenue for the six months ended June 30, 2021;

This client contributed 10.5 % and 9.1 % of total revenue for the nine months ended September 30, 2022 and 2021, respectively.

The Company had one client that contributed in excess of 10% of total revenue for the nine months ended September 30, 2021;

this client operates in the financial services sector.

This client contributed 7.4 % and 14.2 % of total revenue for the six months ended June 30, 2022 and 2021, respectively.

This client contributed 7.4 % and 13.3 % of total revenue for the nine months ended September 30, 2022 and 2021, respectively.

The Company does have clients with aggregate revenue exceeding $ 100 million annually and the loss of one or more of these clients could have a material adverse effect on the Company’s business, operating results, or financial condition.

1 unchanged sentence

To limit the Company’s credit risk with its clients, management performs periodic credit evaluations, maintains allowances for credit losses and may require pre-payment for services from certain clients.

Based on currently available information, management does not believe significant credit risk existed as of June 30, 2022.

Based on currently available information, management does not believe significant credit risk existed as of September 30, 2022.

Activity in the Company’s Allowance for credit losses consists of the following (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Balance, beginning of period

14 unchanged sentences

The cash proceeds from this Agreement are included in the change in accounts receivable within the operating activities section of the Consolidated Statements of Cash Flow.

As of June 30, 2022 and December 31, 2021, the Company had factored $ 95.1 million and $ 97.7 million, respectively, of accounts receivable;

As of September 30, 2022 and December 31, 2021, the Company had factored $ 85.6 million and $ 97.7 million, respectively, of accounts receivable;

under the Agreement discounts on these receivables were not material during the quarter.

As of June 30, 2022, the Company had collected $ 11.8 million of cash from customers which had not been remitted to the Bank.

As of September 30, 2022, the Company had collected $ 10.0 million of cash from customers which had not been remitted to the Bank.

The unremitted cash is restricted cash and is included within Prepaid and other current assets with the corresponding liability included in Accrued expenses on the Consolidated Balance Sheet.

The Company has not recorded any servicing assets or liabilities as of June 30, 2022 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

The Company has not recorded any servicing assets or liabilities as of September 30, 2022 as the fair value of the servicing arrangement as well as the fees earned were not material to the financial statements.

Effective November 1, 2022, the Company amended the arrangement to modify the list of eligible clients who may be sold pursuant to the Agreement, and to memorialize the transition from LIBOR to SOFR for discount calculation purposes.

Goodwill consisted of the following (in thousands):

Acquisitions /

September 30,

The Company performs a goodwill impairment assessment on at least an annual basis.

The Company conducts its annual goodwill impairment assessment during the fourth quarter, or more frequently, if indicators of impairment exist.

During the quarter ended June 30, 2022, the Company assessed whether any such indicators of impairment existed and concluded there were none.

During the quarter ended September 30, 2022, the Company assessed whether any such indicators of impairment existed and concluded there were none.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(6) DERIVATIVES

5 unchanged sentences

Conversely, the fair value of derivative liabilities reflects the Company’s creditworthiness.

As of June 30, 2022, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults.

The following table summarizes the aggregate unrealized net gain or loss in Accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021 (in thousands and net of tax):

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of September 30, 2022, the Company has not experienced, nor does it anticipate, any issues related to derivative counterparty defaults.

The following table summarizes the aggregate unrealized net gain or loss in Accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021 (in thousands and net of tax):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Aggregate unrealized net gain/(loss) at beginning of period

2 unchanged sentences

Aggregate unrealized net gain/(loss) at end of period

The Company’s foreign exchange cash flow hedging instruments as of June 30, 2022 and December 31, 2021 are summarized as follows (amounts in thousands).

The Company’s foreign exchange cash flow hedging instruments as of September 30, 2022 and December 31, 2021 are summarized as follows (amounts in thousands).

All hedging instruments are forward contracts.

As of June 30, 2022

As of September 30, 2022

Canadian Dollar

5 unchanged sentences

(1) Includes contracts to purchase Philippine pesos in exchange for New Zealand dollars and Australian dollars, which are translated into equivalent U.S.

dollars on June 30, 2022 and December 31, 2021.

Fair Value Hedges

The Company enters into foreign exchange forward contracts to economically hedge against foreign currency exchange gains and losses on certain receivables and payables of the Company’s foreign operations.

Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net.

As of June 30, 2022 and December 31, 2021 the total notional amounts of the Company’s forward contracts used as fair value hedges were $ 46.6 million and $ 32.9 million, respectively.

dollars on September 30, 2022 and December 31, 2021.

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

Fair Value Hedges

Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings in Other income (expense), net.

As of September 30, 2022 and December 31, 2021 the total notional amounts of the Company’s forward contracts used as fair value hedges were $ 54.3 million and $ 32.9 million, respectively.

Derivative Valuation and Settlements

The Company’s derivatives as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30, 2022

The Company’s derivatives as of September 30, 2022 and December 31, 2021 were as follows (in thousands):

September 30, 2022

Not Designated

17 unchanged sentences

Total fair value of derivatives, net

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2022 and 2021 were as follows (in thousands):

Three Months Ended June 30,

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the three months ended September 30, 2022 and 2021 were as follows (in thousands):

Three Months Ended September 30,

Designated as Hedging

4 unchanged sentences

Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Three Months Ended June 30,

Three Months Ended September 30,

Not Designated as Hedging Instruments

4 unchanged sentences

Other income (expense), net

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2022 and 2021 were as follows (in thousands):

Six Months Ended June 30,

The effects of derivative instruments on the Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2022 and 2021 were as follows (in thousands):

Nine Months Ended September 30,

Designated as Hedging

4 unchanged sentences

Amount and location of net gain or (loss) reclassified from Accumulated OCI to income - effective portion:

Six Months Ended June 30,

Nine Months Ended September 30,

Not Designated as Hedging Instruments

4 unchanged sentences

Other income (expense), net

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) FAIR VALUE

6 unchanged sentences

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following presents information as of June 30, 2022 and December 31, 2021 for the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.

The following presents information as of September 30, 2022 and December 31, 2021 for the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.

Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature.

2 unchanged sentences

An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary.

As of March 31, 2018, the investment in CaféX Communication, Inc., which consisted of the Company’s total $ 15.6 million investment, was fully impaired to zero.

Debt - The Company’s debt consists primarily of the Company’s Credit Facility, which permits floating-rate borrowings based upon the current Prime Rate or LIBOR plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement).

As of June 30, 2022 and December 31, 2021, the Company had $ 930.0 million and $ 791.0 million, respectively, of borrowings outstanding under the Credit Facility.

During the second quarter of 2022 outstanding borrowings accrued interest at an average rate of 2.0 % per annum, excluding unused commitment fees.

As of September 30, 2022 and December 31, 2021, the Company had $ 955.0 million and $ 791.0 million, respectively, of borrowings outstanding under the Credit Facility.

During the third quarter of 2022 outstanding borrowings accrued interest at an average rate of 3.5 % per annum, excluding unused commitment fees.

The amounts recorded in the accompanying Balance Sheets approximate fair value due to the variable nature of the debt based on Level 2 inputs.

1 unchanged sentence

The portfolio is valued using models based on market observable inputs, including both forward and spot foreign exchange rates, interest rates, implied volatility, and counterparty credit risk, including the ability of each party to execute its obligations under the contract.

As of June 30, 2022, credit risk did not materially change the fair value of the Company’s derivative contracts.

The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of June 30, 2022 and December 31, 2021 (in thousands):

As of June 30, 2022

As of September 30, 2022, credit risk did not materially change the fair value of the Company’s derivative contracts.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of September 30, 2022 and December 31, 2021 (in thousands):

As of September 30, 2022

Fair Value Measurements Using

15 unchanged sentences

Total net derivative asset (liability)

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following is a summary of the Company’s fair value measurements as of June 30, 2022 and December 31, 2021 (in thousands):

As of June 30, 2022

The following is a summary of the Company’s fair value measurements as of September 30, 2022 and December 31, 2021 (in thousands):

As of September 30, 2022

Fair Value Measurements Using

5 unchanged sentences

Derivative instruments, net

Deferred compensation plan asset

Contingent consideration

Deferred compensation plan liability

Derivative instruments, net

2 unchanged sentences

Redeemable noncontrolling interest

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of December 31, 2021

6 unchanged sentences

Derivative instruments, net

Deferred compensation plan liability

Deferred compensation plan asset

Derivative instruments, net

2 unchanged sentences

Redeemable noncontrolling interest

The table above has been updated from the amounts included as of December 31, 2021 presented in the Annual Report on Form 10-K filed with the SEC on March 3, 2022 to include the fair value of the investments maintained as an asset for the deferred compensation plan.

Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees.

Participants in the deferred compensation plan select from a menu of phantom investment options for their deferral dollars offered by the Company each year, which are based upon changes in value of complementary, defined market investments.

The deferred compensation liability represents the combined values of market investments against which participant accounts are tracked.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The plan assets are invested in a variety of equity and bond mutual funds.

The deferred compensation asset represents the combined fair value of all the funds based on quoted values and market observable inputs.

Contingent Consideration - The Company recorded contingent consideration payable related to the acquisitions of the U.S.

8 unchanged sentences

The future contingent consideration for the VF US and VF ASEAN acquisitions were finalized at $ 9.6 million and were paid during March 2022.

Contingent receivables – The Company recorded a contingent receivable related to the acquisition of Faneuil that closed in 2022.

The contingent receivable was valued based on a weighted average of several current scenarios and a receivable of $ 10.4 million was recorded as of the acquisition date.

A rollforward of the activity in the Company’s fair value of the contingent consideration receivable and payable is as follows (in thousands):

Faneuil receivable

During the third quarter of 2022, a fair value adjustment of $ 2.4 million net benefit was recorded related to fair value adjustments of the estimated contingent payments associated with the Faneuil acquisition based on updated discount factor for one contract and a complete reduction for the second contract as it was not awarded to the Company.

The fair value adjustment benefit was included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Contingent Receivables – The Company recorded a contingent receivable related to the Faneuil acquisition that closed in 2022.

During the third quarter of 2022, the Company recorded a fair value adjustment for the receivable based on current information which caused the receivable to decrease, and a $ 4.4 million expense was included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

A rollforward of the activity in the Company’s fair value of the contingent consideration payable is as follows (in thousands):

September 30,

A rollforward of the activity in the Company’s fair value of the contingent consideration receivable is as follows (in thousands):

September 30,

(8) IMPAIRMENT OF ASSETS

During each of the periods presented, the Company evaluated the recoverability of its leasehold improvement assets at certain customer engagement centers as well as all internally developed software projects.

An asset is considered to be impaired when the anticipated undiscounted future cash flows of its asset group are estimated to be less than the asset group’s carrying value.

An asset group is considered to be impaired when the anticipated undiscounted future cash flows of its asset group is estimated to be less than the asset group’s carrying value.

The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value.

1 unchanged sentence

Assumptions included the amount and timing of estimated future cash flows and assumed discount rates.

During the three and six months ended June 30, 2022, the Company recognized impairment losses, net related to leasehold improvements assets, right of use lease assets, internally developed software and certain computer equipment of $ 9.2 million and $ 10.4 million, respectively, across the TTEC Digital and TTEC Engage segments.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the three and nine months ended September 30, 2022, the Company recognized impairment losses, net related to leasehold improvements assets, right of use lease assets, internally developed software and certain computer equipment of $ 2.9 million and $ 13.3 million, respectively, across the TTEC Digital and TTEC Engage segments.

(9) INCOME TAXES

4 unchanged sentences

The Company’s selection of an accounting policy with respect to both the global intangible low taxed foreign income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) rules is to compute the related taxes in the period the entity becomes subject to either GILTI or BEAT.

As of June 30, 2022, the Company had $ 21.4 million of net deferred tax assets (after a $ 28.1 million valuation allowance) and a net deferred tax asset of $ 16.7 million (after deferred tax liabilities of $ 4.7 million) related to the United States and international tax jurisdictions whose recoverability is dependent upon future profitability.

The effective tax rate for the three and six months ended June 30, 2022 was 20.2 % and 18.7 %, respectively.

The effective tax rate for the three and six months ended June 30, 2021 was 17.8 % and 20.3 %, respectively.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of September 30, 2022, the Company had $ 19.5 million of net deferred tax assets (after a $ 25.0 million valuation allowance) and a net deferred tax asset of $ 15.2 million (after deferred tax liabilities of $ 4.3 million) related to the United States and international tax jurisdictions whose recoverability is dependent upon future profitability.

The effective tax rate for the three and nine months ended September 30, 2022 was 15.2 % and 17.7 %, respectively.

The effective tax rate for the three and nine months ended September 30, 2021 was 30.6 % and 21.9 %, respectively.

The Company’s U.S.

4 unchanged sentences

In the first, third and fourth quarters of 2021, changes to the valuation allowance were recorded in the amount of $ 2.4 million, $ 6.4 million and $ 5.1 million, respectively, for assets that did not meet the “more-likely-than-not” standard.

In the first quarter of 2022, $ 1.3 million, and in the second quarter of 2022, $ 0.6 million was released from the valuation allowance for assets that are expected to be recognized in the future.

In the first, second and third quarters of 2022, $ 1.3 million, $ 0.6 million and $ 2.5 million, respectively, were released from the valuation allowance for assets that are expected to be recognized in the future.

The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the government of the Philippines.

1 unchanged sentence

In the Philippines, the Company has been granted multiple agreements with an initial period of tax at 0% for four years, which will be fully expired in 2022 and additional periods at a reduced tax rate, expiring at various times beginning in 2030.

The aggregate benefit to income tax expense for the three months ended June 30, 2022 and 2021 was approximately $ 0.0 million and $ 2.6 million, respectively, which had an impact on diluted net income per share of $ 0.00 and $ 0.05 , respectively.

The aggregate effect on income tax expense for the six months ended June 30, 2022 and 2021, was approximately $ 1.0 million and $ 3.7 million benefit, respectively, which had an impact on diluted net income per share of $ 0.02 and $ 0.08 , respectively.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The aggregate benefit to income tax expense for the three months ended September 30, 2022 and 2021 was approximately $ 0.3 million and $ 0.5 million, respectively, which had an impact on diluted net income per share of $ 0.01 and $ 0.01 , respectively.

The aggregate effect on income tax expense for the nine months ended September 30, 2022 and 2021, was approximately $ 1.3 million and $ 4.2 million benefit, respectively, which had an impact on diluted net income per share of $ 0.03 and $ 0.09 , respectively.

(10) COMMITMENTS AND CONTINGENCIES

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The $300 million increase was in the form of a term loan, could be prepaid anytime and would become due February 14, 2024, contemporaneously with the expiration of the revolving line of credit.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The maximum commitment under the Credit Facility is $ 1.5 billion in the aggregate, if certain conditions are satisfied.

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The Company primarily utilizes its Credit Facility to fund working capital, general operations, dividends and other strategic activities, such as the acquisitions described in Note 2.

As of June 30, 2022 and December 31, 2021, the Company had borrowings of $ 930.0 million and $ 791.0 million, respectively, under its Credit Facility, and its average daily utilization was $ 966.3 million and $ 662.8 million for the six months ended June 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, the Company had borrowings of $ 955.0 million and $ 791.0 million, respectively, under its Credit Facility, and its average daily utilization was $ 1,023.6 million and $ 747.9 million for the nine months ended September 30, 2022 and 2021, respectively.

During early April 2021, the Company increased borrowings by approximately $ 500 million in connection with the acquisition of Avtex (see Note 2).

Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $ 425 million as of June 30, 2022.

As of June 30, 2022, the Company was in compliance with all covenants and conditions under its Credit Agreement.

Based on the current level of availability based on the covenant calculations, the Company’s remaining borrowing capacity was approximately $ 370 million as of September 30, 2022.

As of September 30, 2022, the Company was in compliance with all covenants and conditions under its Credit Agreement.

Letters of Credit

As of June 30, 2022, outstanding letters of credit under the Credit Facility totaled $ 12.6 million and primarily guaranteed workers’ compensation and other insurance related obligations.

As of June 30, 2022, letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $ 0.3 million.

As of September 30, 2022, outstanding letters of credit under the Credit Facility totaled $ 2.6 million and primarily guaranteed workers’ compensation and other insurance related obligations.

As of September 30, 2022, letters of credit and contract performance guarantees issued outside of the Credit Agreement totaled $ 0.3 million.

Indebtedness under the Credit Agreement is guaranteed by certain of the Company’s present and future domestic subsidiaries.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Legal Proceedings

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Based on currently available information and advice received from counsel, the Company believes that the disposition or ultimate resolution of any current legal proceedings, except as otherwise specifically reserved for in its financial statements, will not have a material adverse effect on the Company’s financial position, cash flows or results of operations.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(11) DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS

Revenue recognized for the six months ended June 30, 2022 from amounts included in deferred revenue as of December 31, 2021 was $ 134.8 million.

Revenue recognized for the six months ended June 30, 2021 from amounts included in deferred revenue as of December 31, 2020 was $ 67.4 million.

Revenue recognized for the nine months ended September 30, 2022 from amounts included in deferred revenue as of December 31, 2021 was $ 196.5 million.

Revenue recognized for the nine months ended September 30, 2021 from amounts included in deferred revenue as of December 31, 2020 was $ 126.0 million.

Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods.

The Company’s RPO excludes performance obligations from on-demand arrangements as there are no minimum purchase commitments associated with these arrangements, and certain time and materials contracts that are billed in arrears.

As of June 30, 2022, the Company’s RPO was $ 288.2 million, which will be delivered and recognized within the next three year s.

As of September 30, 2022, the Company’s RPO was $ 293.8 million, which will be delivered and recognized within the next three year s.

However, the amount and timing of revenue recognition are generally driven by customer consumption, which can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(12) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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Net current period other comprehensive income (loss)

Accumulated other comprehensive income (loss) at June 30, 2021

Accumulated other comprehensive income (loss) at September 30, 2021

Accumulated other comprehensive income (loss) at December 31, 2021

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Net current period other comprehensive income (loss)

Accumulated other comprehensive income (loss) at June 30, 2022

Accumulated other comprehensive income (loss) at September 30, 2022

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents the classification and amount of the reclassifications from Accumulated other comprehensive income (loss) to the Statement of Comprehensive Income (Loss) (in thousands):

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Comprehensive Income

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Net income (loss)

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Comprehensive Income

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The following table sets forth the computation of basic and diluted shares for the periods indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Shares used in basic earnings per share calculation

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Shares used in dilutive earnings per share calculation

For the three months ended June 30, 2022 and 2021, there were Restricted Stock Units (“RSUs”) of 281 thousand and one thousand, respectively, outstanding which were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.

For the six months ended June 30, 2022 and 2021, there were RSUs of 239 thousand and two thousand, respectively, outstanding which were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.

(14) EQUITY-BASED COMPENSATION PLANS

All equity-based awards to employees are recognized in the Consolidated Statements of Comprehensive Income (Loss) at the fair value of the award on the grant date.

During the three and six months ended June 30, 2022 and 2021, the Company recognized total equity-based compensation expense of $ 4.1 million and $ 7.9 million and $ 3.3 million and $ 7.4 million, respectively.

Of the total compensation expenses, $ 1.6 million and $ 3.2 million were recognized in Cost of services and $ 2.5 million and $ 4.7 million were recognized in Selling, general and administrative during the three and six months ended June 30, 2022, respectively.

During the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 1.1 million and $ 2.5 million in Cost of services and $ 2.2 million and $ 4.9 million in Selling, general and administrative, respectively.

For the three months ended September 30, 2022 and 2021, there were Restricted Stock Units (“RSUs”) of 542 thousand and four thousand, respectively, outstanding which were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.

For the nine months ended September 30, 2022 and 2021, there were RSUs of 377 thousand and 78 thousand, respectively, outstanding which were excluded from the computation of diluted net income per share because the effect would have been anti-dilutive.

TTEC HOLDINGS, INC.

1 unchanged sentence

Notes to Consolidated Financial Statements

(14) EQUITY-BASED COMPENSATION PLANS

All equity-based awards to employees are recognized in the Consolidated Statements of Comprehensive Income (Loss) at the fair value of the award on the grant date.

During the three and nine months ended September 30, 2022 and 2021, the Company recognized total equity-based compensation expense of $ 5.4 million and $ 13.2 million and $ 4.6 million and $ 12.0 million, respectively.

Of the total compensation expenses, $ 2.2 million and $ 5.4 million were recognized in Cost of services and $ 3.2 million and $ 7.8 million were recognized in Selling, general and administrative during the three and nine months ended September 30, 2022, respectively.

During the three and nine months ended September 30, 2021, the Company recognized compensation expense of $ 2.0 million and $ 4.4 million in Cost of services and $ 2.6 million and $ 7.6 million in Selling, general and administrative, respectively.

Restricted Stock Unit Grants

During the six months ended June 30, 2022 and 2021, the Company granted 155,897 and 11,656 RSUs, respectively, to new and existing employees, which vest over four to five years .

The Company recognized compensation expense related to RSUs of $ 3.8 million and $ 7.4 million for the three and six months ended June 30, 2022, respectively.

The Company recognized compensation expense related to RSUs of $ 2.6 million and $ 5.9 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, there was approximately $ 56.2 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.

During the nine months ended September 30, 2022 and 2021, the Company granted 365,515 and 219,883 RSUs, respectively, to new and existing employees, which vest over four to five years .

The Company recognized compensation expense related to RSUs of $ 5.0 million and $ 12.4 million for the three and nine months ended September 30, 2022, respectively.

The Company recognized compensation expense related to RSUs of $ 4.1 million and $ 10.0 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, there was approximately $ 45.2 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.

Performance Based Restricted Stock Unit Grants

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Each fiscal year’s adjusted operating income determined the award amount.

The Company recognized compensation expense related to the 2019 PRSUs of $0.3 million and $0.7 million for the three and six months ended June 30, 2021, respectively.

The Company recognized compensation expense related to the 2019 PRSUs of $0.3 million and $0.8 million for the three and nine months ended September 30, 2021, respectively.

During 2020, the Company awarded PRSUs that are subject to service and performance vesting conditions.

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Each fiscal year’s revenue and adjusted operating income will determine the award amount.

The Company recognized compensation expense related to the 2020 PRSUs of $ 0.4 million and $0.5 million, respectively, for the three and six months ended June 30, 2022.

The Company recognized compensation expense related to the 2020 PRSUs of $0.5 million and $1.0 million, respectively, for the three and six months ended June 30, 2021.

The Company recognized compensation expense related to the 2020 PRSUs of $ 0.3 million and $0.8 million, respectively, for the three and nine months ended September 30, 2022.

The Company recognized compensation expense related to the 2020 PRSUs of $0.2 million and $1.2 million, respectively, for the three and nine months ended September 30, 2021.

During 2021, the Company awarded PRSUs that are subject to service and performance vesting conditions.

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Expense for these awards will begin at the start of the requisite service period, beginning January 1, 2023.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During 2022, the Company made awards of two different PRSU programs that are subject to service and performance vesting conditions:

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Expense for these awards will begin at the start of the requisite service period, beginning January 1, 2024 and January 1, 2025, respectively.

TTEC HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(15) RELATED PARTY TRANSACTIONS

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Tuchman, Chairman and Chief Executive Officer of the Company, has an indirect 100% beneficial ownership interest in Avion and Airmax.

During the six months ended June 30, 2022 and 2021, the Company expensed $ 0.3 million and $ 0.5 million, respectively, to Avion and Airmax for services provided to the Company.

There was $ 139 thousand in payments due and outstanding to Avion and Airmax as of June 30, 2022.

During the nine months ended September 30, 2022 and 2021, the Company expensed $ 0.4 million and $ 0.5 million, respectively, to Avion and Airmax for services provided to the Company.

There was $ 72 thousand in payments due and outstanding to Avion and Airmax as of September 30, 2022.

Paolillo, Global Chief Operating Officer of the Company, was a member of the board of directors of Welltok, Inc., a consumer health SaaS company, and partner of the Company in the TTEC Welltok joint venture.

During the six months ended June 30, 2022 and 2021, the Company recorded revenue of $ 0.5 million and $ 0.9 million, respectively, in connection with work performed through the joint venture.

During the nine months ended September 30, 2022 and 2021, the Company recorded revenue of $ 0.5 million and $ 1.2 million, respectively, in connection with work performed through the joint venture.

As of December 2021, Ms.

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and the joint venture has been wound down, but TTEC continues to service revenue for Welltok, Inc.

Paolillo is a member of the board of directors of Unisys, a global information technology company.

During the six months ended June 30, 2022 and 2021, the Company recorded revenue of $ 0.1 million and $ 0.3 million, respectively, in connection with services performed for Unisys.

Michelle Swanback, Chief Executive Officer of TTEC Engage, is a member of the board of directors of Willis Towers Watson, who provides compensation consulting and insurance services to the Company.

During the six month ended June 30, 2022, the Company expenses $ 0.8 million.

Paolillo is a member of the board of directors of Unisys (NYSE:

UIS), a global information technology company.

During the nine months ended September 30, 2022 and 2021, the Company recorded revenue of $ 0.1 million and $ 0.4 million, respectively, in connection with services performed for Unisys.

Paolillo is a member of the board of directors of Alight (NYSE:

ALIT), a provider of digital human capital and business solutions.

Starting in November 2022, the Company engaged Alight to provide certain benefit communication and enrollment services.

During the nine months ended September 30, 2022, the Company did not have any expenses for these services.

Michelle Swanback, Chief Executive Officer of TTEC Engage, is a member of the board of directors of WTW (NYSE:

WTW) (fka “Willis Towers Watson”), that provides compensation consulting and insurance brokerage services to the Company.

During the nine months ended September 30, 2022, the Company expensed $ 0.9 million for these services.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

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risks inherent in the reliability of our information technology systems;

risks related to our information technology infrastructure’s cybersecurity in general, and criminal activity such as ransomware, other malware and data exfiltration or destruction in particular, which can impact our ability to consistently deliver uninterrupted service to our clients;

our dependence on third parties for our cloud solutions;

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the risk related to our international operations including risks associated with the Russian invasion of Ukraine in the first quarter of 2022 and impacts it may have on our clients’ European based businesses and the Company’s business;

the risks related to legal and regulatory impact on our operations, including rapidly changing laws that regulate our and our clients’ business, such as data privacy and data protection laws, regulatory changes impacting our healthcare businesses, financial and public sector specific regulations, our ability to comply with these laws timely and cost effectively;

and the cost of wage and hour litigation in the United States;

the risks related to legal and regulatory impact on our operations, including rapidly changing laws that regulate our and our clients’ business, such as data privacy and data protection laws, cyber security regulations, regulatory changes impacting our healthcare businesses, financial and public sector specific regulations, our ability to comply with these laws timely and cost effectively;

the cost of wage and hour litigation in the United States;

the impact of the post COVID-19 pandemic economic recovery and regulatory realities on our business and our clients’ business;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements